Payroll Certification: An Alternative to Effort Reporting

1Where Innovation Is Tradition

Payroll Certification: An Alternative to Effort Reporting

NCURA FRARich Andrews, UC Irvine

Mike Laskofski, George MasonMarch 11, 2013

Where Innovation Is Tradition2

Why Monitor Effort/Salary?

• Salary and wages account for approximately 60% of all sponsored expenditures

• Certification of salary and wages on federal awards is required by the federal government

• Key area of focus by auditors to verify what was proposed was actually done

Where Innovation Is Tradition3

Effort Reporting: Why Change?

• Effort incurred across multiple activities is difficult to measure

• Effort reports provide limited controls• Administration is inefficient and costly

Where Innovation Is Tradition4

Federal Demonstration Partnership

• Federal Demonstration Partnership (FDP) began in 1986 and is a cooperative initiative among 10 federal agencies and 119 research institutions

• FDP is focused on reducing the administrative burdens associated with research

• 2005 FDP survey of over 6000 faculty reported that 42% time on federal awards spent on administrative tasks

• 2011 FDP survey of over 13000 faculty similar results

Where Innovation Is Tradition5

Payroll Certification: What is it?

Payroll Certification is an alternative to Effort Reporting that uses a project based methodology and utilizes the concept that “charges are reasonable in relation to work performed”

Where Innovation Is Tradition6

Payroll Certification: Benefits• Concept is straightforward and easy to

understand by faculty and administrators• Certification timeframe consistent with

project period and annual technical reporting• Smaller group of certifiers allows for more

effective outreach and training• More time to focus on key internal controls • Reduced administrative burden

Where Innovation Is Tradition7

George Mason University

• Public University located in Fairfax, Virginia• Established in 1972• Over 32,500 students on 4 campuses• Sponsored Expenditures FY12: $97M• George Mason became an FDP member in 2008

Where Innovation Is Tradition8

Payroll Certification: Approval

• Mason received approval from the FDP and the Office of Naval Research (ONR) effective January 1, 2011 to pilot Payroll Certification

• Three other pilot schools – UC Irvine (HHS), UC Riverside (HHS), Michigan Tech (ONR)

Where Innovation Is Tradition9

Pilot Proposal Conditions• All awards transitioned by January 1, 2012• Update policies/procedures, revise DS-2, deploy

training and provide ONR detailed milestone plan for implementation

• Provide feedback to FDP semi-annually• DCAA review of DS-2 for adequacy• Meet with ONR quarterly to review implementation• Review pilot progress regularly but no stated end date

Where Innovation Is Tradition10

Communication and Outreach• Research Council• Senior Administration (Provost, Deans)• Department Chairs• Faculty Meetings• OSP Advisory Group (Senior Unit Administrators)• Training Sessions (50+ attendees March/April 2011)• Website, Email, Newsletter• Individual support for PIs and Liaisons monthly

Where Innovation Is Tradition11

Payroll Certification vs. Effort ReportingDescription Effort Reporting Payroll Certification

System Focus Individuals Project (Grant or Contract)

Timeframe for Distribution

Consistent points in time End of Project Budget Year

Certification Frequency

Three Times per Year Annually

Types of Funding All Sponsored Funds Federal Funds

Annual # of Reports 2700 700

Approvers Individuals charged to projects

Principal Investigator

System Rationale Effort reasonable based on overall institutional effort

Salary and wage amounts reasonable based on work performed

Committed Cost Sharing

Shown as percentage of overall institutional effort

Shown as amount reasonable based on work performed

12Where Innovation Is Tradition

Payroll Certification Report Samples

Where Innovation Is Tradition13

Where Innovation Is Tradition14

Where Innovation Is Tradition15

Payroll Certification Process

• OSP generates reports 60 days after the last day of the month for the anniversary date or project end date, whichever is sooner

• Reports distributed to Payroll Certification Liaison

• Payroll Certification Liaison works with PIs to obtain approval

Where Innovation Is Tradition16

Payroll Certification Process cont.• Payroll Certification Liaison returns reports to

OSP within 45 days of distribution• Reports not received within 45 days sent to

Dean for follow-up and completion within 2 weeks

• Any reports not certified within 60 days will result in salary charges moved to a non-sponsored source of funding

Where Innovation Is Tradition17

Assessment of Payroll Certification

• Comparison to “old” effort reporting process• Survey completed February 2011 (150

respondents; majority faculty) to benchmark effort reporting process

• Payroll Certification follow-up survey will be completed Spring 2013

• Feedback from faculty and administrators continues to be very positive

Where Innovation Is Tradition18

Assessment of Payroll Certification

• DCAA DS-2 adequacy review completed Fall 2011 with no findings

• Through 20 reporting cycles (Jan 2011 thru Aug 2012)• 70% of reports received within 30 days compared to

33% under prior process in 2010• 95% of reports received within 45 days • 100% of reports received within 60 days

Where Innovation Is Tradition19

Monitoring Effort/Salary

• Include some level of PI effort on all projects• Request sponsor approval if PI is absent for more

than 3 months or 25% reduction in PI time • Avoid charging faculty 100% to sponsored funds

if they have other responsibilities• Process funding change forms timely

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Monitoring Effort/Salary cont…• Include complete explanations and necessary

approval signatures• Track committed cost share with activity code• Complete payroll certifications timely• Avoid funding adjustments after project period

previously certified• Review project expenses regularly

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Next Steps for George Mason Pilot

• Complete follow-up survey Spring 2013• Regular updates to FDP on pilot progress • Meet with ONR quarterly• Internal Audit report March 2013• IG Audit 2013 Spring 2013

Where Innovation Is Tradition22

Questions

Mike Laskofski George Mason

[email protected]

Rich AndrewsUC Irvine

[email protected]

Payroll Certification:An Alternative to Effort Reporting

Rich Andrews

University of California, Irvine

March 11, 2013

University of California, Irvine

• Public University located in Irvine, California• Part of a 10 campus system• Founded in 1965• About 28,000 students• FY 2011-12 research expenditures: $245M• A Medical Center• No football team

Payroll Certification: Approval

• UC Irvine received approval from the FDP and the Department of Health and Human Services (HHS) effective April 1, 2011 to pilot Payroll Certifications

• UC Irvine implemented the system in August 2011

Control Benefits

• Focuses on special costing rules• NIH Salary Cap• NSF Salary Limit• Clerical and Administrative Salaries• No proposal preparation charges• 90% to 100% federal funded salary = minimal

other activities• Easier to understand• Integrates with other controls

Payroll andPayroll

Distribution

Human Resources

Effort Reports

Monitoring

Proposals

Work LoadRecords

Faculty & Staff Input

Internal Controls Supporting Effort Reporting

Internal Audit

Training Whistleblower

Accounting System

Policies andProcedures

Financial Status Reports

InternalControls

Federal Guidelines

Payroll andPayroll

Distribution

Human Resources

Monitoring

Proposals

Work LoadRecords

Faculty & Staff Input

Payroll Certifications as an Internal Control

Internal Audit

Training Whistleblower

Accounting System

Policies andProcedures

Financial Status Reports

InternalControls

Payroll Certifications

Federal Guidelines

Unfocused Compliance

Compliance

Costing Issues Effort Reports

NIH Salary CapNSF Salary Limit

Etc.

Correct SignerTimely

Etc.

Payroll Certifications Focus on Compliance

Principal Investigator Co-Principle Investigator Project Accounting Support Lab Supervisors Contract and Grants Accounting Sponsored Project Administration

ComplianceCompliance

Establish Expectations

Pilot Proposal Conditions

• 18-month pilot• All awards transitioned on April 1, 2011• Pilot initially ended September, 30, 2012• Pilot extended to December 31, 2013• Updated policies/procedures, revised DS-2• Training and new websites• Two Internal Audit Reviews at 9 & 18 months• Faculty and Staff survey• Email certifications allowed

Communication and Outreach

• Trained Payroll Certification Coordinators

• Faculty trained by Coordinators

• Notified senior management

• Emailed Faculty

Payroll Certification Reports

• Payroll Expense Reports

• Pay Certification Reports

• Instructions

Certification Rationale

OMB Circular A-21, J.10.c.(1)(e) Plan Confirmation

“At least annually a statement will be signed by the employee, principal investigator, or

responsible official(s) using suitable means of verification that the work was performed,

stating that salaries and wages charged to sponsored agreements as direct charges, and to residual, F&A cost or other categories are reasonable in relation to work performed.”

Payroll Certification Reports

• Around the 7th of each month, Contracts and Grants Accounting notifies departments that the PCS has certifications for them to download.

• PCS Coordinators work with the PI’s to obtain certification.

• The completed certification is due back in Contracts and Grants Accounting within 45 days.

Payroll Certification Reports

• If not certified within 45 days, assistant deans, finance administrators, and the Vice Chancellor for Research are notified.

• Policy allows for transferring uncertified salaries off sponsored projects after 60 days, but has not been enforced.

Number of Payroll CertificationsUniversity of California, Irvine

MONTH 2011 2012January 72February 76March 103 April 81 84 May 97 90 June 201 208July 145 139 August 266 246September 130 133October 25 18November 56 46December 89 85 Total 1,300

Number of Payroll CertificationsUniversity of California, Irvine

EffortMonth 2011 2012 ReportsJanuary 72February 76 2,600 March 103 April 81 84 May 97 90 2,600June 201 208July 145 139August 266 246 2,600September 130 133October 25 18November 56 46 2,600December 89 85 Total 1,300 10,400

Reviews, Surveys and Audits

• UC Internal Audit Review @ 9 months• UC system wide survey• UC Internal Audit Review @ 18 months• Future HHS and NSF audits

Internal Audit Reviews

• Comply with proposal to HHS• 100% coverage• Timely certifications• Acceptable cost transfers• Cost notes

Payroll Certification SurveyUC Riverside and Irvine

Overall user

preference

Payroll Certification SurveyUC Riverside and Irvine

Support staff

responses about the amount of

work required

Payroll Certification SurveyUC Riverside and Irvine

Preferences of Principal Investigators

Payroll Certification SurveyUC Riverside and Irvine

Preferences of support

staff

Payroll Certification SurveyUC Riverside and Irvine

Payroll Certification SurveyUC Riverside and Irvine

HHS/NSF Audit

• Much National Interest in Payroll Certifications• Joint HHS/NSF audit planned for all 4 demonstration

sites• Start audit: March or April 2013• 5-person teams onsite for 2 weeks• Typical financial audit• Payroll Certifications to date & 1 yr. Effort Reports• Individual reports to each university• Probably a consolidated report to OMB.

Final Comment

We like Payroll Certifications!!!!!

Questions?

Mike Laskofski George Mason

[email protected]

Rich AndrewsUC Irvine

[email protected] d